Prime Minister Benjamin Netanyahu on Saturday said he would establish a committee to probe Israel's announcement this week that it would construct 1,600 new housing units in East Jerusalem, which has since led to a diplomatic crisis with the United States.

"Prime Minister Netanyahu decided to create a team to probe the events that unfolded during U.S. Vice President Biden's visit to Israel," read a statement from the Prime Minister's Office.

"The team will formulate regulations to prevent the recurrence of similar incidents in the future," the statement continued.

The U.S. has waged harsh criticism of Israel's announcement on Tuesday about new settlement construction - a move that deeply embarrassed the visiting Biden and imperiled U.S. plans to launch indirect negotiations between Israel and the Palestinians.